Hm I think the main thrust of this post misses something, which is that different conditions, even contradictory conditions, can easily happen locally. Obviously, it can be raining in San Francisco and sunny in LA, and you can have one person wearing a raincoat in SF and the other one the beach in LA with no problem, even if they are part of the same team.
I think this is true of wealth inequality.
Carnegie or Larry Page or Warren Buffett got their money in a non exploitative way, by being better than others at something that was extremely socially valuable. Part of what enables that is living in a society where capital is allocated by markets and there are clear price signals.
But many places in the world are not like this. Assad and Putin amassed their wealth via exploitative and extractive means. Wealth at the top in their societies is a tool of oppression.
I think this geographic heterogeneity implies that you should have one kind of program in the US (e.g. with about market failures with goods with potentially very high negative externalities like advanced AI) and another in e.g. Uganda where direct cash transfers (if you are careful to ensure they don’t get expropriated by whenever the local oppressors are) could be very high impact.
In both extremes, wealth results from forming and leading coalitions: but at one extreme it’s by leading a coalition to produce things for others, and in the other it’s by leading a coalition to extract things from others.
Fair point about localized heterogeneity. But simply having different optimal interventions in different places doesn’t itself justify splitting resources across them. That would require either:
Steeply diminishing returns up to the relevant margin for each intervention (making diversification optimal), or
Having more resources than we can deploy in all plausibly effective interventions.
Either claim would be surprising and worth investigating explicitly. I intended this piece as a call for such investigation.
Moreover, if we take your example—productive wealth inequality in the US vs extractive in Uganda—this actually strengthens the case against portfolio diversification. Under this model, returns to investment in Uganda would be systematically captured by extractive institutions. The efficient response might be to focus on systemic changes that reduce extraction (like charter cities or immigration reform) rather than direct aid or cash transfers. This illustrates why we need explicit models of how these systems interact.
Hm I think the main thrust of this post misses something, which is that different conditions, even contradictory conditions, can easily happen locally. Obviously, it can be raining in San Francisco and sunny in LA, and you can have one person wearing a raincoat in SF and the other one the beach in LA with no problem, even if they are part of the same team.
I think this is true of wealth inequality.
Carnegie or Larry Page or Warren Buffett got their money in a non exploitative way, by being better than others at something that was extremely socially valuable. Part of what enables that is living in a society where capital is allocated by markets and there are clear price signals.
But many places in the world are not like this. Assad and Putin amassed their wealth via exploitative and extractive means. Wealth at the top in their societies is a tool of oppression.
I think this geographic heterogeneity implies that you should have one kind of program in the US (e.g. with about market failures with goods with potentially very high negative externalities like advanced AI) and another in e.g. Uganda where direct cash transfers (if you are careful to ensure they don’t get expropriated by whenever the local oppressors are) could be very high impact.
In both extremes, wealth results from forming and leading coalitions: but at one extreme it’s by leading a coalition to produce things for others, and in the other it’s by leading a coalition to extract things from others.
Fair point about localized heterogeneity. But simply having different optimal interventions in different places doesn’t itself justify splitting resources across them. That would require either:
Steeply diminishing returns up to the relevant margin for each intervention (making diversification optimal), or
Having more resources than we can deploy in all plausibly effective interventions.
Either claim would be surprising and worth investigating explicitly. I intended this piece as a call for such investigation.
Moreover, if we take your example—productive wealth inequality in the US vs extractive in Uganda—this actually strengthens the case against portfolio diversification. Under this model, returns to investment in Uganda would be systematically captured by extractive institutions. The efficient response might be to focus on systemic changes that reduce extraction (like charter cities or immigration reform) rather than direct aid or cash transfers. This illustrates why we need explicit models of how these systems interact.